Conservatives back hike in MP pension contributions

The Conservative caucus, seen here marking the one-year anniversary of its majority government on May 2, has signed on to a plan that would see a 50/50 split between parliamentarians and taxpayers to fund the MPs and senators pension plan. (Sean Kilpatrick/Canadian Press)

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The Conservative caucus has accepted a government proposal that would ease the burden on taxpayers by more than tripling how much members of Parliament and senators kick into their pension plans, CBC News has learned

Currently, MPs and senators contribute around $11,000 a year to their own pensions, while taxpayers add about $64,000 for each pension plan.

Under the proposal, it would be a 50/50 split, CBC's national affairs editor Chris Hall reported.

A 50/50 contribution split would bring the parliamentary pension plan in line with changes being implemented for the federal public service.

Who pays for MPs pensions?

Current contributions per year:

MPs/senators pay approx. $11,000.

Government pays rest (approx. $64,000).

Taxpayers pay at least $6 for each $1 parliamentarians contribute.

Proposal:

50/50 split between taxpayers and MPs/senators.

Each parliamentarian could contribute up to $38,000.

If the pension plan's benefit levels do not change, politicians may need to contribute close to a quarter of an MP's current salary to meet taxpayers halfway. At current benefit levels, parliamentarians would have to contribute around $38,000 a year, a jump of more than $25,000 from what they pay now.

Alternatively, the benefits payable could become less generous.

Hall said it's still unclear whether eligibility rules could change, such as increasing how long MPs will have to serve from six years to eight, or if they will have to collect their pensions later at age 60, as opposed to 55.

A change in eligibility rules could also affect the amount serving parliamentarians need to contribute to the plan.

The pay freeze on MPs and senators salaries may end, but it's unclear how much salaries might rise to compensate for greater pension contribution requirements.

The changes are expected to take effect in the next Parliament, affecting MPs and senators who start in 2015 and beyond. Those already serving would not see their pension eligibility change.

Contribution disparities under current plan

A study by the C.D. Howe Institute last January found that in 2011, the taxpayers' share of contributions to the plan was more than six times the amount paid by MPs into the plan.

Numbers released last June by the Canadian Taxpayers' Federation tallied an even greater disparity in who bears the brunt of the costs: the taxpayer watchdog believes the public contributes more than $24 for every $1 contributed by MPs.

Under the current system, parliamentarians contribute seven per cent of their gross salaries to the pension plan. The pension pays out three per cent of this average of their best salary per year of service.

Pension eligibility:

MPs/senators must serve at least 6 six years (could increase).

Benefits start at age 55 (could increase).

Benefits based on years of service and five best years of salary (current salaries start at $158,000).

Many observers consider the current pension payouts very generous. Each MP makes just under $158,000 a year and after six years of sitting in the House, each qualifies at age 55 for a pension based on the average of his or her best five years of salary.

Assuming the minimum six years of service at the current $158,000 annual salary, a backbench MP stands to receive a pension of more than $28,000 a year.

Long-serving parliamentarians or those who earned higher salaries, such as cabinet ministers, receive much more.

Figures from 2011 suggest there are 59 former MPs and senators who receive more than $90,000 a year each. The average annual pension is $60,599 for former members of the Senate and $55,102 for former members of the House of Commons.

The parliamentary pension scheme changed significantly in the early nineties. Not every former MP, or senator or their survivors receives benefits at these levels. Sixty former parliamentarians, or spouses and dependents of former parliamentarians, received benefits of less than $15,000 in 2011.

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